Aug 1, 2008

World - Brazil rides a wave of growth

Desperate to escape her hand-to-mouth existence in one of Brazil's poorest regions, Maria Benedita Sousa used a small loan five years ago to buy two sewing machines and start her own business making women's underwear.
Today Sousa, a mother of three who started out working in a jeans factory making minimum wage, employs 25 people in a modest two-room factory that produces 55,000 pairs of cotton underpants a month. She bought and renovated a house for her family and is now thinking of buying a second car. Her daughter, who is studying to be a pharmacist, could be the first family member ever to finish college.
"You can't imagine the happiness I am feeling," Sousa, 43, said from the floor of her business, Big Mateus, named after a son. "I am someone who came from the countryside to the city. I battled and battled, and today my children are studying, with one in college and two others in school. It's a gift from God."
Today her country is lifting itself up in much the same way.
Brazil, which has the largest economy in South America, is finally poised to realize its long-anticipated potential as a global player, economists say, as the country rides its biggest economic expansion in three decades.

That growth is being felt in nearly all parts of the economy, creating a new class of superrich even as people like Sousa lift themselves into an expanding middle class.
It has also given Brazil new swagger, providing it, for instance, with greater leverage to push for a tougher bargain with the United States and Europe in global trade talks. After seven years, those negotiations finally broke down this week over demands by India and China for safeguards for their farmers, a clear sign of the rising clout of these emerging economies.
Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia.
Instead, he has fueled Brazil's growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasilia. Sousa is one such beneficiary.
Long known for its unequal distribution of wealth, Brazil has shrunk its income gap by 6 percent since 2001, more than any other country in South America this decade, said Francisco Ferreira, a lead economist at the World Bank.
While the top 10 percent of Brazil's earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, said Marcelo Cortes Neri, the director of the Center for Social Policies at the Getúlio Vargas Foundation in Rio de Janeiro.
But Brazil is also outspending most of its Latin American neighbors on social programs, and overall public spending continues to be nearly four times as high as what Mexico spends as a percentage of its gross national product, Ferreira said.
Still, the momentum of its economic expansion is expected to last.
As the United States and parts of Europe struggle with recession and the fallout from housing crises, the Brazilian economy shows few of the vulnerabilities of other emerging powers.
It has greatly diversified its industrial base, has massive potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade.
Yet while exports of commodities like oil and agricultural goods have driven much of its recent growth, Brazil is less and less dependent on them, economists say, having the advantage of a huge domestic market - 185 million people - that has grown wealthier with the success of people like Sousa.
In fact, with a stronger currency and inflation mostly in check, Brazilians are on a spending spree that has become a prime motor for the economy, which grew by 5.4 percent last year.
They are buying both Brazilian goods and a rising flood of imported products. Many businesses have relaxed credit terms to allow Brazilians to pay for refrigerators, cars and even plastic surgery over years instead of months, despite some of the highest interest rates in the world. In June the country reached 100 million credit cards issued, a 17 percent jump over last year.
At Casas Bahia, a modestly priced Brazilian furniture store chain, the number of customers buying items on installments nearly tripled to 29.3 million from 2002 to 2007, said Sonia Mitaini, a company spokeswoman.

Other signs of new wealth abound. In Macaé, an oil boomtown near Rio de Janeiro, contractors are racing to finish new shopping malls and luxury housing to keep up with demand from burgeoning oil-service firms. At a port in Angra dos Reis, a town known for its spectacular islands, some 25,000 workers have found jobs building new Brazilian oil platforms.
Petrobras, Brazil's national oil company, shocked the oil world in November when it announced that its Tupi deepwater field offshore of Rio de Janeiro could hold up to eight billion barrels of oil.
Analysts think there could be billions of barrels more in surrounding areas, making Brazil second only to Venezuela in Latin America.
While the oil will be expensive and complicated to extract, Petrobras has said it expects to be producing up to 100,000 barrels a day from Tupi by 2010 and hopes to produce up to a million barrels a day in about a decade.
The new oil plays are setting off an investment boom in Rio de Janeiro, with an estimated 107 billion reals, or $68 billion, expected to flow into the state by 2010, according to the Brazilian government. Petrobras alone expects to invest $40.5 billion by 2012.
Some economists say a slowdown in the rest of the world's economy, especially in Asia, which is soaking up much of Brazilian exports of soybeans and iron ore, could crimp growth here. "But that probability is small," said Alfredo Coutino, the senior economist for Latin America for Moody's
In fact, because the Brazilian economy has become so diversified, the country is less susceptible to a hangover from the struggling U.S. economy, unlike many others in Latin America.
Brazilian exports to the United States represent just 2.5 percent of the Brazilian gross national product, compared with 25 percent of GNP for Mexican exports, according to Moody's.
Mery Galanternick contributed reporting from Rio de Janeiro.

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